Nova execs optimistic after 1st Q results

Nova Chemicals Inc. officials are upbeat after a quarter in which its operating businesses showed a profit for the first time in three years.

Nova's olefins/polyolefins and styrenics businesses combined for $12 million in first-quarter operating profit. Those businesses had a total operating loss of $13 million in the first quarter of 2003.

Olefins/polyolefins accounted for all of the first-quarter operating profit. Its $34 million gains offset a loss of $22 million in styrenics.

``We think we'll see [polyethylene] growth of 5-6 percent this year,'' Nova PE Vice President John Hotz said May 10 at the firm's Pittsburgh headquarters. ``We're optimistic because the film market's doing pretty well and packaging also has been solid.''

Nova's total PE sales volume in pounds was up 8 percent to 791 million in the first quarter vs. the year-ago period. Overall sales revenue in olefins/polyolefins was up 11 percent to $709 million.

The firm also set a record in the first quarter by selling almost 175 million pounds of its Advanced Sclairtech-brand enhanced PE, which is made with single-site catalyst technology.

``We've continued to place an emphasis on Advanced Sclairtech,'' Hotz said. ``It's been sold into film for the most part, but we've also had some sales into injection molding and rotomolding.''

Elsewhere on the technology front, Hotz said a commercial run will be made by the end of the year for a new PE product designed by Nova using metallocene catalysts from British Petroleum plc. Hotz declined to identify which company would handle the initial run.

Nova's styrenics unit continued to struggle on the profit side in the first quarter, even though sales volume in pounds - including styrene monomer and solid and expandable polystyrene - was up 13 percent to just over 1 billion pounds.

``We expect to do better than last year,'' styrenics President Chris Pappas said. ``Demand in North America and Europe should reflect [gross domestic product].''

Pappas described the North American solid PS market as ``closer to balanced'' with operating rates of 86-88 percent, but he pointed out that the true driver in the styrenics market is styrene monomer feedstock. Global operating rates for that material are moving above 90 percent. Historically, styrene operating rates of 92-93 percent indicate a tight market, Pappas said.

Nova's styrenics unit also has set a goal of basing 30 percent of its product mix in differentiated, higher-margin products by 2005. That percentage currently is at 18, up from 12-14 percent in 2002. To meet this goal, Nova has increased technology spending in the unit by 40-45 percent this year, adding both lab equipment and personnel.

Pappas said boosting technology spending is unusual these days. ``Most of the others [in Nova's market] are cutting back,'' he said.

To meet demand for these higher-end styrenics products, Nova is working on a pair of expansion projects in Monaca, Pa. The firm is close to completing a debottleneck that will increase capacity there for its Dylark-brand styrene/maleic anhydride resin by 7.5 percent. Another recent expansion doubled capacity for Nova's Arcel-brand PS/PE interpolymer in Monaca.

In the last two years, Nova has closed older, less efficient capacity in its PE and PS businesses. The firm shut down 175 million pounds of PS capacity in Chesapeake, Va., and Breda, the Netherlands, in 2002. Nova also is in the process of closing a 275 million pound capacity linear low density PE line in Corunna, Ontario. About 80 percent of the LLDPE line's production will be moved to other Nova plants.

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